San Diego’s first legal pot shop says an illegal rival is threatening business — and that police won’t act

An unlicensed business has been selling cannabis from a small tent near the Otay Mesa border crossing for nearly three months, despite repeated complaints to police from a licensed dispensary half a block away.

Owners of the licensed dispensary — the city’s first when it opened back in 2015 — are threatening to sue San Diego for failing to act, contending similar tents could start popping up across the city if police send the message such activity will be tolerated.

A Police Department spokesperson said Wednesday that the situation is more complicated than police simply swooping in and shutting down the tent, which the operators replaced with a sturdier shed on Tuesday.

“We are aware of this and it’s being investigated,” Lt. Travis Easter said. “These types of investigations take a long time because of what’s involved.”

Easter said because the tent is a business, elements of the municipal code need to be lined up carefully, and police must take additional steps they wouldn’t need to take in other cases, such as an assault.

A lawyer for the legal dispensary, A Green Alternative, said his client has nearly run out of patience as the tent continues to steal customers from his already-struggling business.

The lawyer, Lance Rogers, said the tent operators’ switch this week to a more permanent shed shows that they don’t expect the city to shut their business down any time soon.

“The government needs to do its part,” Rogers said. “The government can’t just look the other way when illegal activity is going on.”

The situation recalls San Diego’s struggles to shut down hundreds of unlicensed cannabis storefronts as the city began permitting legal dispensaries for the first time in 2014.

After several years of limited success with civil injunctions based on zoning violations, then-City Attorney Jan Goldsmith began criminally prosecuting unlicensed operators and their landlords in early 2016.

The number of illegal storefronts dropped from about 300 to nearly zero by 2018, when Mara Elliott succeeded Goldsmith.

Since then, new illegal storefronts have not emerged. But dozens of illegal delivery services have begun operating using unmarked cars and concealing their storage sites.

Rogers said it’s crucial for the city to shut down illegal cannabis operations so that legal dispensaries don’t face unfair competition from businesses that pay no taxes and flout many strict city and state regulations.

Those regulations include requirements to test their cannabis products, have security guards on site, have security cameras and conduct background checks on all workers.

In a formal demand letter to the city, Rogers said illegal cannabis businesses can charge much less than legal operations because of lower overhead, which threatens to put the legal operations out of business.

“A Green Alternative operates in strict compliance with laws including regulations regarding security, product safety and age restrictions,” the letter says. “We may be forced to seek judicial intervention as AGA is on the brink of insolvency due to this ongoing activity.”

In addition, the city and state recently widened the price gap between legal and illegal operations by hiking the taxes dispensaries must pay.

In March, San Diego raised its city cannabis tax from 8% to 10% — a figure equal to the highest rate in California and significantly higher than the rates of all other local cities. The state cannabis tax rose from 15% to 19% on July 1.

Those two changes pushed the total tax paid by legal dispensaries on each sale to more than 35%.

Rogers said it’s particularly frustrating that city officials have been slow to shut the nearby tent down when they were so quick last year to shut down yoga classes at the beach officials deemed illegal.

Those classes resumed this spring after courts ruled against the city’s restrictions.

“The fact that this is going on in daylight next to a public sidewalk is shocking,” Rogers said. “Is this going on in other communities? If so, how much tax revenue has the city lost?”

Easter said he hasn’t been made aware of any similar illegal operations elsewhere in the city. He said police will aggressively investigate such operations if they are made aware.

“If the community lets us know, we will do our best to do something about it,” he said.

Before the police, Rogers contacted city code enforcement, which confirmed the illegal operation on Aug. 1 and informed the Police Department.

Rogers said police responded to a stabbing at the tent on Aug. 12, so they have been aware of it at least since then.

A Green Alternative became the first dispensary in San Diego to receive a license in 2014 and the first to open in 2015. Its address is 2335 Roll Drive in Otay Mesa.